Rates have been gradually dropping over the past few months, but June saw some of the lowest mortgage rates of the year.
As a result, June ended up having a low rate average.
Last month, the average rate for a closed loan was 4.27%, the lowest average for 2017. It’s the lowest a monthly average has been since December of last year.
Low mortgage rates have been fueling the housing market and have kept homes more easily affordable for home buyers. However, rates have been fluctuating higher and lower over the past few weeks making current rates more difficult to track.
One surprise from June is that rates dropped compared to May despite the fact that the Fed decided to raise their rates at the beginning of June. Typically, the Fed opting to raise rates would lead to an increase in mortgage rates.
However, mortgage rates have not been very predictable in 2017. As a result, home buyers have had a difficult time trying to get the lowest available rates.
If June’s data is any sign of the future of the housing market, then home buyers will still have time to find a home before the market slows down. As mortgage rates rise, the housing market is going to start to cool off.
Since rates are low and home buyers are eager to find houses, many current homeowners are finding that now is a good time to sell. If this keeps up, it could end up leading to another rate hike from the Fed, and possibly even higher mortgage rates.
Home Buyers Still Able To Get Mortgages
Every month, mortgage software company Ellie Mae tracks mortgage information from around the country. Roughly 75 percent of all mortgages go through their software, so their monthly origination report is seen as a trustworthy source for mortgage data.
Their report tracks mortgages that closed in a 90-day period, although many mortgages close much quicker than that. A closed mortgage is a mortgage that went through the mortgage application process and was approved.
In June, it took an average of 43 days for a mortgage to close. That’s a fast pace, considering that the fastest average for any month in 2016 was 44 days.
Combine the quick pace of mortgages closing with low mortgage rates and you have a market that’s very buyer friendly. However, the national housing shortage still gives power to the home sellers.
But this isn’t stopping home buyers. Lenders are eager to get people into homes, so they’re willing to make mortgages easier to get – and less expensive – for all types of home buyers.
Another sign of this is with FICO scores. In June, the average FICO score for a closed mortgage was 724, a fairly low amount historically.
It’s important for home buyers to keep in mind that the 724 credit score is an average, so many current homeowners with lower credit scores were approved for mortgages.
Also, over 70 percent of all mortgages that went through Ellie Mae’s system closed in a 90-day period, and over 75% of all purchase loans were closed in the same period.
While it can be hard for some home buyers to find a house, there are plenty of factors that are aiding home buyers.
Rates Could Rise Soon
Ellie Mae’s Origination Report covers the data from the previous month, so mortgage rates have already changed from those that were reported. This is important to know, especially since the Fed is scheduled to meet soon.
At their meeting next week, the Fed could decide to raise rates. The current impression is that they will maintain the current rate, but even that decision can have an effect on housing.
If Ellie Mae’s historical data is any representation, then mortgage rates could be on their way down. In 2016, rates dropped by an average of 20 basis points (0.20%) from June to August. This is mostly because summer is the busiest season for home buyers.
As the summer buying season starts to slow in August, rates could drop to try and attract more home buyers. There are even signs that they have already started trending downward.
Ellie Mae’s Origination Insight report gives valuable information to home buyers, but the data is a collection of mortgage rates from the previous month. Currently, mortgage rates are lower than those reported.
Home buyers and refinancers looking for the lowest possible rates will want to keep their eye on rate trends.